Reference no: EM13585889

1. In 2014, James invested $30,000 in a cattle-feeding partnership that used nonrecourse notes to purchase $70,000 of feed, which was used to feed the cattle and expensed. If James's share of the expense was $50,000, what is the most that James can deduct in 2014?

a. $20,000

b. $30,000

c. $50,000

d. $70,000

2. Pamela, a corporate executive, exercised an incentive stock option ("ISO") granted by Pamela's employer to purchase 10,000 shares of the corporation's stock at the option price of $1 per share (i.e., the exercise price was $1 per share). The stock is freely transferable. At the time the option was exercised, the stock was selling for $21 per share. What is the AMT adjustment that results from Pamela exercising the ISO (assume that Pamela will NOT dispose of any of the stock during the year)?

a. $210,000

b. $200,000

c. $10,000

d. $0

3. Stephanie, a single parent, lives in an apartment with Stephanie's THREE minor children each under age 11, whom Stephanie supports. For 2014, Stephanie will have AGI and earned income of $22,000. Calculate the amount, if any, of Stephanie's earned income credit.

a. $0

b. $3,000

c. $5,265

d. $6,143

4. Jonathan and Cristine are married and file a joint return. In 2014, Cristine worked fulltime and earned $20,000, while Jonathan worked fulltime and earned $16,000. Assume their 2014 AGI equaled $36,000. Assume they incurred $8,000 of child care expenses during 2014 for their TWO dependent children, Jeanette and Sascha (who are 2 and 4 years old, respectively). What is their child and dependent care CREDIT amount?

a. $8,000

b. $6,000

c. $2,000

d. $1,440

5. In 2007, Mayelin received stock from Sandra worth $20,000 at the time of the GIFT. At the time of the gift, Sandra's adjusted basis in the stock was $30,000. What is the gain or loss that Mayelin should report for 2014 if she sold the stock to Dy in 2014 for $25,000 (ignore any gift tax that may have been paid on the transfer from Sandra to Mayelin)?

a. There is no gain or loss

b. $25,000 gain

c. $5,000 gain

d. $5,000 loss

6. Now, assume that in the previous question Mayelin sold the stock to Dy for $40,000(instead of $25,000). What is the gain or loss that Mayelin should report (again, ignore any gift tax that may have been paid on the transfer from Sandra to Mayelin)?

a. There is no gain or loss

b. $10,000 gain

c. $20,000 gain

d. $40,000 gain

7. Now, assume that in Question 5 Mayelin sold the stock to Dy for $10,000 (instead of $25,000). What is the gain or loss that Mayelin realized on the sale to Dy (again, ignore any gift tax that may have been paid on the transfer from Sandra to Mayelin)?

a. There is no gain or loss

b. $10,000 loss

c. $20,000 loss

d. $25,000 gain

8. Jhoslen traded in office equipment with an adjusted basis of $20,000 (and value of $40,000) for other (like-kind) office equipment then valued at $35,000. Jhoslen also received $5,000 in cash as part of the deal. What was Jhoslen's recognized gain on the exchange, if any?

a. $40,000

b. $20,000

c. $5,000

d. $0

9. Thomas traded in computer equipment with an adjusted basis of $15,000 (and a value of $15,000) for other (like-kind) computer equipment then valued at $13,000. Thomas also received $2,000 in cash as part of the deal. What was Thomas's realized gain on the exchange, if any?

a. $0

b. $2,000

c. $13,000

d. $15,000

10. In 2014, Kayanna and Damian sold a house to Guerol for $850,000. Prior the 2014 sale, neither Kayanna nor Damian had ever excluded a gain from the sale of a personal residence. Kayanna and Damian had lived in the house for the last sixyears and used it exclusively for personal purposes. Kayanna and Damian had purchased the house for $100,000. Kayanna and Damian started living in the house immediately after purchasing it and never made any capital improvements to the house or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a gain did Kayanna and Damian realize on the sale to Guerol (assume that Kayanna and Damian are married and file a joint return)?

a. $0

b. $250,000

c. $500,000

d. $750,000

11. Assume the facts stated in the previous question. How much of a gain must Kayanna and Damian recognize on the sale to Guerol?

a. $0

b. $250,000

c. $500,000

d. $750,000

12. In 2014, Lemisse will have taxable income of approximately $60,000. In 2014, Lemisse will also have a long-term capital loss of $17,000. Lemisse has no other capital gains or losses (in 2014 or prior years). For 2014, what is the maximum capital loss amount that Lemisse may use to offset her other income?

a. $17,000

b. $14,000

c. $3,000

d. $0

13. Assume the facts stated in the prior question. Assume further that for 2014 Lemisse offset her wages (with her capital loss) to the maximum extent permitted by law. What is the amount of Lemisse's capital loss carryover to 2015?

a. $17,000

b. $14,000

c. $3,000

d. $0

14. Monica is a single taxpayer in the 35% tax bracket. Monica wants to minimize her 2014 tax liability. Which of the following provides the LARGEST tax benefit to Monica (assume that she may legally take advantage of each item in its entirety for 2014)?

a. A $500 exclusion from gross income.

b. A $5,000 deduction from gross income.

c. A $500 tax credit.

d. Options "a" and "c" would provide the largest tax benefits.

15. What was the MAXIMUM EARNED INCOME CREDIT amount that Gonzalo and Amy could possibly take for 2014? Assume they are U.S. taxpayers filing a joint return with TWO qualifying children.

a. $6,000

b. $5,460

c. $2,000

d. $0

16. Which item MOST resembles an interest free loan from the U.S. government?

a. First-time homebuyer credit for a closing that occurred in June of 2008

b. The American Opportunity tax credit

c. The earned income credit

d. The child tax credit

17. In early 2014, Ellice sold her personal residence to Sagi for $400,000. At the time of the sale, Ellice's adjusted basis was $100,000. Within three months of the sale, Ellice moved into a new residence she purchased for $700,000. What is Ellice's basis in her new residence?

a. $700,000

b. $600,000

c. $400,000

d. $300,000

18. Which of the following is TRUE?

a. When compared to deferrals, exclusions are more temporary in nature

b. Section 1031 provides for an elective deferral upon certain exchanges

c. When compared to exclusions, deferrals are more temporary in nature

d. All of the above

19. Anne-Emilie's business property (located in Wesleyville USA) was condemned by the proper local authorities. Immediately before the condemnation, the property had a fair market value of $800,000 and Anne-Emilie's adjusted basis in the property was $500,000. The local authorities replaced Anne-Emilie's condemned property with similar Wesleyville property having a fair market value of $700,000.

What is Anne-Emilie's realized gain or loss relating to these matters?

a. Gain of $700,000

b. Gain of $200,000

c. Loss of $100,000

d. $0

20. Assume the facts stated in the prior question. What is Anne-Emilie's recognized gain or loss relating to such matters?

a. Gain of $700,000

b. Gain of $200,000

c. Loss of $100,000

d. $0

21. Assume the facts stated in the prior two questions. What is Anne-Emilie's basis in the Wesleyville property she received as a result of the condemnation (i.e., what is Anne-Emilie's basis in the newly acquired property)?

a. $800,000

b. $700,000

c. $500,000

d. $0

22. In 2014, Mary and Tim sold a house to Zoff for $650,000. Mary and Tim had purchased the house for $900,000 in 2005 (during the real estate boom). Mary and Tim started living in the house immediately after purchasing it and never made any capital improvements to it or took any depreciation (or other deductions) against it. Assume there were no selling expenses. How much of a LOSS may Mary and Tim recognize on the sale to Zoff (assume that Mary and Tim are married and file a joint return and itemize deductions)?

a. $0

b. $249,900 less 10% of their AGI

c. $250,000 less 10% of their AGI

d. $250,000

23. Riphard purchased land for $50,000 in 1985. The land was valued at $1,050,000 on July 1, 2014, when Riphard died. Riphard's son Jose inherited the land. What basis would Jose have in the land as a result of the inheritance?

a. $0

b. $50,000

c. Riphard's adjusted basis on July 1, 2014 (if different than $50,000)

d. $1,050,000

24. Assume the same facts stated in the previous question. Which of the following is most likely TRUE, if Jose sold the land in September 2014 for $1,200,000?

a. In 2014, Jose should "recapture" any depreciation previously taken by Riphard on the land

b. In 2014, Jose will be taxed on the appreciation that occurred while Riphard held the land (provided that such appreciation was previously not taxed)

c. Jose's 2014 gain is short-term

d. Jose's 2014 gain is long-term

25. Which of the following statements is most likely TRUE for Jamison (a typical individual taxpayer in the 35% tax bracket)?

a. Jamison usually prefers ordinary income to long-term capital gains

b. Jamison usually prefers capital losses to ordinary losses

c. Jamison usually prefers a $500 credit to a $1,000 deduction

d. Both "a" and "b" are correct

26. Pablo, who owns and operates an ICE CREAM SHOP as a sole proprietor, has the following property:

- STOCKS held for Pablo's investment

- Elaborate ice cream making EQUIPMENT that was inherited from Crucilena(Pablo's grandmother) (it is used exclusively in the ICE CREAM SHOP)

- CHAIRS that are used exclusively in the ICE CREAM SHOP

- A COMPUTER used exclusively in the ICE CREAM SHOP

Considering the above items, which option below lists the capital asset(s) under Section 1221?

a. Only the STOCKS

b. Only the STOCKS & CHAIRS

c. Only the EQUIPMENT, CHAIRS & COMPUTER

d. Each of the above assets is a capital asset under Section 1221

27. Iris recently purchased a piece of land, a building and a truck for a lump sum of $500,000. The fair market value of the land was $250,000, the fair market value of building was $300,000, and the fair market value of the truck was $50,000.

What is Iris's basis in the LAND?

a. $250,000

b. $208,333

c. $166,667

d. $0

28.On September 1, 2001, Timothy paid $660 for 100 shares of TXX-5761 Inc. common stock. On August 13, 2014, Timothy received a nontaxable 10% common stock dividend (i.e., 10 additional shares of identical common stock). On August 13, 2014, TXX-5761 Inc. the common stock was trading on the market for $100 a share. On October 15, 2014, Timothy sold the 10 shares he received on August 13, 2014 to Kevin. What is the basis of the 10 shares Timothy sold to Kevin?

a. $1,000

b. $66

c. $60

d. $0

29. Refer to the facts stated in the prior question. The gain or loss resulting from the October 15, 2014 sale to Kevin will most likely be:

a. Long-term

b. Short-term

c. Both short-term and long-term

d. Neither short-term nor long-term

30. In 2014, Catherine sold a piece of equipment from Catherine's business for $200,000. The equipment was purchased in 2010 for $120,000. Assume total of $84,000 depreciation was taken (prior to the sale). What is Catherine's recognized gain on the sale?

a. $80,000

b. $84,000

c. $164,000

d. $200,000

31. Refer to the facts stated in the prior question. What amount of the gain (at least) will be recaptured at Catherine's ordinary income rate?

a. $80,000

b. $84,000

c. $164,000

d. $200,000

32. Refer to the facts stated in the prior two questions. What amount of the gain will be treated as Section 1231 gain and (possibly) taxed at the long-term capital gain rate?

a. $80,000

b. $84,000

c. $164,000

d. $200,000

33. Which of the following is most likely Section 1245 property (assume that each item has been held long-term and is used in a trade or business)?

a. Inventory

b. Office Building

c. Office Furniture

d. Land

34. Which of the following would MOST LIKELY require an adjustment for the alternative minimum tax?

a. A gambling loss

b. A deduction for property taxes

c. A charitable contribution deduction

d. Each of the above items requires an adjustment for the alternative minimum tax

35. Which of the following is most likely Section 1231 property (assume that each item has been held long-term and is used in a trade or business)?

a. Section 1250 property

b. Section 1245 property

c. Land

d. Each of the above items is Section 1231 property

36. Jorge was at risk for $20,000 in Partnership X and $25,000 in Partnership Z on January 1, 2014. Both partnerships are passive activities to Jorge (these are Jorge's only passive activities). Jorge's share of net income from Partnership X during 2014 is $15,000. Jorge's share of losses from Partnership Z during 2014 is $45,000. How much is Jorge at risk for Partnership X on January 1, 2015?

a. $0

b. $15,000

c. $20,000

d. $35,000

37. Refer to the facts in the previous question. How much is Jorge at risk for Partnership Z on January 1, 2015

a. $0

b. $25,000

c. $45,000

d. $70,000

38. Refer to the facts in the previous questions. What is Jorge's carryover under the at-risk rules for Partnership Z in 2014?

a. $0

b. $20,000

c. $25,000

d. $45,000

39. Refer to the facts in the previous question. What is Jorge's deductible loss for Partnership Z in 2014?

a. $0

b. $15,000

c. $25,000

d. $45,000

40. Refer to the facts in the previous question. What is Jorge's suspended loss under the passive loss rules for Partnership Z in 2014?

a. $0

b. $10,000

c. $25,000

d. $45,000

41. In 2014, Veronica invested in the LUISA Limited Partnership ("LUISA L.P.") by paying $50,000 cash and contributing additional assets worth $20,000 (and having a basis equal to $15,000 on the date of the contribution). What amount did Veronica have at risk in LUISA L.P. as of January 1, 2015, if LUISA L.P. broke even in 2014(i.e., if LUISA L.P. had no income or loss in 2014)?

a. $70,000

b. $65,000

c. $50,000

d. $20,000

42. Refer to the facts stated in the prior question. But, for this question, assume that LUISA L.P. allocated to Veronica net income of $10,000 from operations in 2014. What amount does Veronica have at risk in LUISA L.P. as of January 1, 2015?

a. $10,000

b. $55,000

c. $75,000

d. $80,000

43. In 2014, Nicole and Pablo (who file a joint return) had an interest expense of $10,000 on a loan that was used to purchase a variety of stock and bonds (all producing taxable income). Assume further that, in 2014, Nicole and Pablo had net investment income of $7,000. Assume they itemize deductions, what is their maximum interest expense deduction in 2014?

a. $0

b. $3,000

c. $7,000

d. $10,000

44. Assume that Tim and Sabrina file a joint return and have the following items for 2014:

Taxable income: $75,000

Positive adjustments: $35,000

Preferences: $40,000

Regular tax ability: $10,463

What was their 2014 AMT?

a. $0

b. $7,192

c. $10,463

d. $17,654

45. Assume that a couple that filed a joint return had 2014 AMTI of $425,000. What was the amount of their actual 2014 exemption for the AMT?

a. $82,100

b. $14,975

c. $7,900 (i.e., $3,950 x 2)

d. $0

46. Alix is negotiating to buy land from Shicquonna. What will Alix's basis be in the land, if Alix gives Shicquonna $75,000 and Alix assumes Shicquonna's mortgage on the land of $50,000?

a. $25,000

b. $50,000

c. $75,000

d. $125,000

47. Which of the following is LEAST likely to qualify as a like-kind exchange under Section 1031 (assume all of the assets are used for business)?

a. Improved real estate for unimproved real estate

b. Office building for a warehouse

c. Office furniture for office equipment

d. Unimproved real estate for computer equipment

48. Andrea exchanges undeveloped real estate for developed real estate on July 30, 2014. On July 30, 2014, the fair market value of each property is $600,000. Andrea had purchased the undeveloped real estate on February 14, 2002, for $300,000. Both properties are considered investment property for Andrea. Which of the following is FALSE?

a. Andrea's basis in the developed real estate is $300,000

b. Andrea will realize a gain of $300,000 from the July 30, 2014 transaction

c. Andrea will recognize a gain of $300,000 from the July 30, 2014 transaction

d. If Andrea sells the developed real estate in June of 2015 for a gain, the gain will most likely be treated as a long-term gain

49.In October 2010, Miranda purchased a playground set at a garage sale for $100. Miranda is not in the business of buying and selling anything. Miranda researched the playground set online and discovered it was worth $700. In July 2014, Miranda sold the playground set through an auction website for that amount (i.e., $700). Which of the following is TRUE considering these transactions?

a. Miranda does not have any income

b. Had Miranda sold the playground set for $25, Miranda could have deducted a $75ordinary loss

c. Miranda has a $600 short-term capital gain

d. Miranda has a $600 long-term capital gain

50. Kathryn had the following net Section 1231 results for each of the years shownbelow.

Tax Year               Net Section 1231              LOSS Net Section 1231 GAIN

2009                                       $0                                              $0

2010                                       $0                                                $0

2011                                       $0                                                $0

2012                                       $10,000

2013                                       $5,000

2014                                                                                       $25,000

Which of the following is TRUE regarding the net Section 1231 gain in 2014?

a. All $25,000 will all be taxed at Kathryn's ordinary income rate

b. All $25,000 will all be taxed at Kathryn's long-term capital gain rate

c. Only $15,000 of the $25,000 will be taxed at Kathryn's ordinary income rate

d. Only $10,000 of the $25,000 will be taxed at Kathryn's ordinary income rate